City policies are helping drive supermarkets under

February 11, 2016 — Source: CRAIN'S—Special programs are nice, but the government should rein in peddlers, lower food-store taxes and repeal a recently-passed law.

Jilly Stephens of City Harvest wrote a thought-provoking op-ed on the decline of supermarkets in New York City, noting that these stores “are the cornerstones of our communities, offering vital food while also lifting local economies, creating critical jobs and facilitating important social connections.”

Stephens recognized that the city needs to make the Fresh program stronger and to develop more effective incentives to not only promote new supermarkets in our neighborhoods, but to preserve our existing ones. She did, however, leave out a couple of major disincentives—city policies that inhibit the industry’s growth.

First, the city's ill-conceived Green Carts initiative has led to the proliferation of produce peddlers in so-called underserved areas. As we in the supermarket industry had predicted, these vendors set up shop right on the commercial strips where supermarkets, bodegas and green grocers were already providing fresh produce to these communities.

These Green Carts and their brethren in Manhattan—who are allowed to operate directly in front of our supermarkets—take anywhere from $5,000 to $6,000 a week from our registers, forcing us to let workers go and costing supervisory personnel their jobs, too. A city whose stated goal is to preserve supermarkets should not allow this kind of unfair competition.

Supermarkets are heavily taxed and regulated in the city. Produce peddlers are not. Our own stores are fully unionized and our workers have great wages and benefits. However, with the kind of overhead we operate with, it is impossible to compete with a peddler whose only expense aside from inventory is a $250 bi-yearly license fee.

Peddlers should be regulated and their locations restricted so that brick-and-mortar food stores can be allowed to grow their businesses without low-overhead competitors cannibalizing their business. This is especially true of the bodegas that have launched a Healthy Bodegas initiative to get these immigrant store owners to alter their business model and provide healthier food options to their community.

The second questionable initiative is the recently passed law designed to protect supermarket workers when a store is sold. This poorly-named Supermarket Retention Act would have the opposite effect from what its promoters have intended.

Often stores that are up for sale have become unprofitable for a combination of reasons, not the least of which could well be labor costs. What the retention bill will do is to incentivize a supermarket seller to look for a drug store or bank as an alternative buyer, avoiding the additional costs to a sale that the legislation mandates.

Legislators, unaware of the dynamics of an industry, often become members of the Good Intentions Paving Company. In this case, their good intentions will yield collateral damages that were never fully considered when they exuberantly joined in singing with the union chorus.

If we really want to promote supermarkets—and we join with City Harvest in seeking this policy goal—we need to lower the cost of doing business here: to reduce regulatory burdens and seek ways to lower food-store taxes on an industry that Stephens rightly sees as promoting better health outcomes for all New Yorkers. Making the Fresh program more attractive without lowering these costs is counterproductive.

Avi Kaner is an owner of Morton Williams Supermarkets, which has 14 stores in New York City.